Restaurants swap ingredients to get by high food costs

Published: Sunday, May 11, 2008

STEVENSON JACOBS

NEW YORK - Struggling with soaring food costs and cashed-strapped customers, restaurants across the country are swapping expensive ingredients for cheaper fare and adding new dishes that won't break their bottom line.

Ben Benson sits down to eat a 24-ounce buffalo rib steak at his steakhouse in New York, Tuesday, May 6, 2008. Wholesale costs of prime beef have shot up 50 percent in the last year, forcing the 36-year-old establishment to raise the price of its signature 18-ounce sirloin steak from $40 to $46, and add new menu items like buffalo, boar and elk to help offset the increases. (AP Photo/Mark Lennihan)

The changes come as record oil prices and surging global demand for staples like rice, fish, poultry and wheat have pushed wholesale food prices up almost 8 percent in the last year, the biggest hike in three decades, according to the National Restaurant Association.

Food commodities prices have mostly come down from record highs reached earlier this year, but wholesale flour prices have still doubled in the last year, while egg prices have shot up 70 percent and cheese 25 percent.

"This is definitely an unprecedented period of wholesale food inflation. Operators must focus on cost, and one way is using different ingredients," said Hudson Riehle, senior vice president of research at the 380,000-member National Restaurant Association.

The organization recently surveyed restaurant operators and found surging food costs ranked as their No. 2 concern after the economy. A year ago, labor was their second biggest worry.

At Ben Benson's Steakhouse in midtown Manhattan, wholesale costs of prime beef have shot up 50 percent in the last year, forcing the 36-year-old establishment to raise the price of its signature 18-ounce sirloin steak from $40 to $46.

"The cost of beef is staggering," said owner Ben Benson, who has added new menu items like buffalo, boar and elk to help offset the increases. "They sell very well. It's not a big percentage but they cost us a little bit less and we sell it for almost the same, so it hedges a little bit."

Bigger chains are seeing benefits of swapping ingredients, too.

Chuck E. Cheese restaurants recently began using a "reformulated" pizza cheese at its 490 locations, helping the company cut costs and turn in positive first-quarter earnings. Richard Frank, CEO of parent

company CEC Entertainment Inc., said the high-moisture mozzarella blend gives customers a "cheesier product" that spreads better and allows the chain to use less cheese on some pizzas.

"It's not a product we targeted because of cost ... but it has helped us offset some of the cost pressure from cheese," Frank said, adding that customers haven't voiced any complaints about the change.

"We thought it had an enhanced taste," Frank said. "When you start to change your food products, you have to make darn sure what you're doing makes sense for your guests."

Sysco Corp., the largest food distributor in North America, is helping customers cope with high food prices, for example, by suggesting less expensive meat cuts, butter blends and other cost-saving substitutions.

"You can go from a filet mignon to a cut of meat that when prepared properly tastes just as good or better but has a smaller price point," Sysco spokesman Mark Palmer said.

Industry professionals insist they're not sacrificing quality for cost when they substitute ingredients or menu items.

Clark Wolf, a New York-based restaurant consultant who has advised high-end clients how ways to save money on ingredients, said the idea is to "reconfigure dishes that have an end result of being appealing food that we can afford to sell."

"What you don't want to do in an uncertain economy is make people think they're getting ripped off," Wolf said.

So far, the changes haven't seemed to faze consumers. Although rising food costs, record oil prices and falling home values have hit Americans hard, they still spend an estimated half their food budget at restaurants because of convenience and time pressures.

"Even though cash is tight, consumers are pretty reticent to back off on their restaurant habit," the National Restaurant Association's Riehle said.

In another dining trend, T.G.I. Friday's, Quiznos, Au Bon Pain and other "fast-casual" restaurants are offering smaller, cheaper portions. But the restaurants are finding that doesn't mean people are eating any less. Instead, many customers are using small-dish dining as an excuse to add to their orders, spending - and probably eating - just as much as before, experts say. The entrees may be smaller, but diners believe that leaves more room for dessert.

Rising world food prices aren't the only factors hurting restaurants. At Captain Joey Patti's seafood restaurant in Pensacola, Fla., scarcity of the popular grouper fish have sent prices skyrocketing.

"We took it off the menu as an everyday item because the cost was outrageous. Now we're selling catfish and mullet instead," said Josie Patti Merritt, co-owner of the 20-year-old family-run business. Wholesale food cost represent roughly half of Merritt's business expenses, forcing to scale back her employees' hours to get by.

"My accountant told me I need to get my food costs to around 35 percent. I told him good luck," she said.

For other restaurants, swapping food items simply isn't an option.

Marc Roth, owner of Roth's Westside Steakhouse on Manhattan's Upper West Side, said he looked into buying cheaper cuts of beef but couldn't find anything to his satisfaction.

"I was looking at different cuts, organic meats, you name it and I never felt it could keep the consistency. It was a tough call but I had to make it," Roth said.

Jack Johnson, owner of Dr. of Barbecue restaurant in Springfield, Ill., said pork prices have shot up by a third in the last year, but that he can't replace pork because it's his most popular item. As a result, a pulled-pork sandwich that cost $4.95 last year costs $5.45 today.

To avoid future price increases, he's considering acquiring a big walk-in freezer and stocking it with a year's worth of pork. "But that's a gamble because if the bottom falls out of the meat market you'd be stuck with a ton of expensive cuts," Jackson said.

Still, given that other restaurants are facing even more cost pressure for eggs, cheese and bread, Jackson considers himself lucky.